The other day I had a conversation with a lawyer who was threatening to sue my client as well as two others. The claim was for $24,000. He was proposing to start the action in the Supreme Court of Nova Scotia.
I asked him why he didn't start the action in the Small Claims Court (where, in Nova Scotia, the jurisdiction includes claims of up to $25,000). He said that he thought that under the new civil procedure rules in Nova Scotia (which came into effect January 1, 2009) he could get his discoveries done in two days and then to trial "reasonably quickly." He thought that the ability to recover some of his client's legal costs (which can't be recovered in Small Claims Court) justified starting the action in the Supreme Court.
But consider the cost of doing it this way.
Two days of discovery and disclosure would cost the client something in the range of $5,000 if not more. Add to that the delay of getting the matter to discovery (at least six months) coupled with the delay of getting it to trial (probably another six months) and then the actual cost of trial itself (again, at least $5,000) coupled with the risk of loss means that the client would be "spending" a year and at least $10,000 to pursue the matter worth $24,000 in the Supreme Court.
Contrast that with a claim in the Small Claims Court. The matter could be heard in one or two evenings (so the client wouldn't loss a day's work) within a month or two of the claim being issued. The client would be paying only for the lawyer's time in court, as opposed to days of shuffling paper at a discovery in a Supreme Court action. He or she would get a decision soon after the hearing, if not on the evening of the hearing. And they would not have to fear paying a portion of the legal costs of the other side if they lost, as is the case in the Supreme Court.
Which aproach do you think the client would chose if asked?
Monday, March 23, 2009
Wednesday, March 18, 2009
The lean towards arbitration ...
A recent decision of the Nova Scotia Supreme Court concludes that where the parties use a "specific" rather than a "universal" arbitration clause the court will still lean towards remitting the matter to arbitration.
In Black & MacDonald Ltd v. Degremont Ltee 2009 NSSC 85. In the case the defendant ("DL") had contracted with Halifax to build three sewage treatment plants. DL then contracted with the plaintiff ("BM") for the supply and installation of some of the treatment systems and equiptment. The contract between DL and BM contained a clause wherein the parties agreed to submit disputes about interim payments to arbitration. A dispute arose over an interim payment and BM commenced an action in the Supreme Court of Nova Scotia. DL then applied for a stay of the action, on the grounds that the arbitration clause applied to the dispute in question.
Justice Coady considered the law. Because the arbitration clause was not a "universal clause" (that is, one that remitted all disputes to arbitration). It was a "specific" clause. His Lordship was accordingly required to analyse carefully the nature of the dispute to see if it came within the arbitration clause. Normal contractual interpretation principles were to be used to determine whether the dispute fell within the arbitration clause. He noted too however that if there was any doubt the matter should be resolved in favour of arbitration. In the end he concluded that the matter did fall within the clause. He stayed the action and remitted the parties to arbitration.
The moral of the story? If parties are to consider arbitration as an alternative dispute resolution system they should use "universal" rather than "specific" arbitration clauses. Use of "specific" clauses simply invites litigation over whether the dispute should be resolved through arbitration or the court--which in the end surely defeats the entire purposes of having any type of arbitration clause in the first place.
In Black & MacDonald Ltd v. Degremont Ltee 2009 NSSC 85. In the case the defendant ("DL") had contracted with Halifax to build three sewage treatment plants. DL then contracted with the plaintiff ("BM") for the supply and installation of some of the treatment systems and equiptment. The contract between DL and BM contained a clause wherein the parties agreed to submit disputes about interim payments to arbitration. A dispute arose over an interim payment and BM commenced an action in the Supreme Court of Nova Scotia. DL then applied for a stay of the action, on the grounds that the arbitration clause applied to the dispute in question.
Justice Coady considered the law. Because the arbitration clause was not a "universal clause" (that is, one that remitted all disputes to arbitration). It was a "specific" clause. His Lordship was accordingly required to analyse carefully the nature of the dispute to see if it came within the arbitration clause. Normal contractual interpretation principles were to be used to determine whether the dispute fell within the arbitration clause. He noted too however that if there was any doubt the matter should be resolved in favour of arbitration. In the end he concluded that the matter did fall within the clause. He stayed the action and remitted the parties to arbitration.
The moral of the story? If parties are to consider arbitration as an alternative dispute resolution system they should use "universal" rather than "specific" arbitration clauses. Use of "specific" clauses simply invites litigation over whether the dispute should be resolved through arbitration or the court--which in the end surely defeats the entire purposes of having any type of arbitration clause in the first place.
Tuesday, March 10, 2009
Mediation gone awry ...
Here's a cautionary note for parties, lawyers and mediators.
Gunvaldesen-Klassen v. Bulpitt 2009 NSSC 66 involved an oil spill at a residence in Halifax, Nova Scotia. The neighbours' property was affected. The neighbours sued the homeowner, who then third partied two prior owners. The insurers of the various parties were involved. There were significant clean up costs (no doubt in excess of several hundred thousand dollars.) The individual insureds also had their own uninsured property damage claims.
Not surprisingly--and quite properly--the parties decided after discover to attempt to mediate a settlement. The negotiations that took place on the day of the mediation were "long and protracted." They ended with the parties thinking they had a settlement. Unfortunately the "settlement" was not reduced to writing. And once the lawyers and insurance representatives returned to their various offices it became apparent that each had a slightly different understanding of what the settlement comprised. In the event one of the parties applied to the Court for an order enforcing the settlement. But the evidence failed to establish that all parties were "of one mind." So the judge ruled that there was no settlement.
The moral of the story? Get it in writing.
It's true that some settlements at mediation--like a personal injury matter where the only issue is quantum of damage--do not really need to be reduced to writing. There is usually only one issue and one number and, usually, only two parties. Agreement is easy to find.
But other settlements--those involving a number of parties with different interests--clearly require something written down before everyone walks out the door. Practitioners (including mediators), take note.
Gunvaldesen-Klassen v. Bulpitt 2009 NSSC 66 involved an oil spill at a residence in Halifax, Nova Scotia. The neighbours' property was affected. The neighbours sued the homeowner, who then third partied two prior owners. The insurers of the various parties were involved. There were significant clean up costs (no doubt in excess of several hundred thousand dollars.) The individual insureds also had their own uninsured property damage claims.
Not surprisingly--and quite properly--the parties decided after discover to attempt to mediate a settlement. The negotiations that took place on the day of the mediation were "long and protracted." They ended with the parties thinking they had a settlement. Unfortunately the "settlement" was not reduced to writing. And once the lawyers and insurance representatives returned to their various offices it became apparent that each had a slightly different understanding of what the settlement comprised. In the event one of the parties applied to the Court for an order enforcing the settlement. But the evidence failed to establish that all parties were "of one mind." So the judge ruled that there was no settlement.
The moral of the story? Get it in writing.
It's true that some settlements at mediation--like a personal injury matter where the only issue is quantum of damage--do not really need to be reduced to writing. There is usually only one issue and one number and, usually, only two parties. Agreement is easy to find.
But other settlements--those involving a number of parties with different interests--clearly require something written down before everyone walks out the door. Practitioners (including mediators), take note.
Sunday, March 8, 2009
Rules of evidence as barriers to justice ...
The Small Claims Court of Nova Scotia permits an Adjudicator to "admit ... evidence at a hearing, whether or not ... admissible as evidence in a court." In other words, the Small Claims Court is not burdened with the strict, arcane and unwieldy laws of evidence that rule in the superior courts. Evidence is weighed according to its weight, not according to whether it is hearsay or not.
This is one of the main reasons that people can have their matters heard in the Small Claims Court in three months rather than three (or more) years, as is the case in the superior courts--and why it doesn't cost them a second mortgage in order to do it.
I wonder how much of the "normal" rules of evidence are a product of history. Centuries ago most legal documents were handwritten rather than printed, and questions of authenticity were difficult to answer. The rules of evidence developed to ensure that the court had some assurance that the documents (and evidence) were in fact authentic. But can we say that that problem is still with us? In today's society printed documents are routinely generated in the ordinary course of business. And isn't it the routine nature of that generation that guarantees a document's authenticy--and hence its reliability? And if that is the case, why the obsession with rules fashioned for an earlier age?
It is true that the common law and various evidence statutes have recognized the truth of this observation. But it seems to me that at a deeper level the rationale underlying this recognition has yet to be fully accepted. And until it is the courts will remain slow, cumbersome and expensive--and ADR process like those in arbitration or the Small Claims Court will be quick, flexible and inexpensive.
This is one of the main reasons that people can have their matters heard in the Small Claims Court in three months rather than three (or more) years, as is the case in the superior courts--and why it doesn't cost them a second mortgage in order to do it.
I wonder how much of the "normal" rules of evidence are a product of history. Centuries ago most legal documents were handwritten rather than printed, and questions of authenticity were difficult to answer. The rules of evidence developed to ensure that the court had some assurance that the documents (and evidence) were in fact authentic. But can we say that that problem is still with us? In today's society printed documents are routinely generated in the ordinary course of business. And isn't it the routine nature of that generation that guarantees a document's authenticy--and hence its reliability? And if that is the case, why the obsession with rules fashioned for an earlier age?
It is true that the common law and various evidence statutes have recognized the truth of this observation. But it seems to me that at a deeper level the rationale underlying this recognition has yet to be fully accepted. And until it is the courts will remain slow, cumbersome and expensive--and ADR process like those in arbitration or the Small Claims Court will be quick, flexible and inexpensive.
Tuesday, March 3, 2009
The cost of justice ...
A recent decision in the Nova Scotia Supreme Court highlights the problems with the current justice system.
In Fougere v. Enfield Hardware the defendant homeowners had a cottage that they wanted the plaintiff builder to renovate into a retirement home. The parties entered into a contract in September 2001. The contract price was $121,000. The defendants occupied the house in June 2002. By this time they had paid all the contract price save for a holdback of $14,000. They complained of numerous deficiencies, and refused to pay the balance.
The builder sued for the holdback. The homeowners counterclaimed for the cost of various deficiencies and damages.
The action went to trial in April 2006, four years after the defendants occupied the house. The trial took 9 days and was spread over a year, with the last day in April 2007. The decision was delivered in February 2009.
The result? The judge found that the defendants had established $7,000 worth of deficiencies, which he deducted from the holdback of $14,000. The balance of the holdback was ordered to be paid to the plaintiff. He also dismissed the balance of the defendants' counterclaim.
So, an action for a holdback of $14,000, which is well within the $25,000 jurisdiction of the Nova Scotia Small Claims Court, ended up taking almost 7 years (and 9 days of trial) to get a result that saw one party ordered to pay roughly $7,000 to the other. One shudders to think of the cost, both in money, time and emotion, that was spent by the parties to reach such a resolution of their dispute.
Such a result cannot be right. Nor can the blame for such a mismatch between cost (in time and money) and result be laid at the door of the parties. Surely the justice system has an obligation to develop procedures that would offer a quicker and cheaper resolution to such disputes.
In Fougere v. Enfield Hardware the defendant homeowners had a cottage that they wanted the plaintiff builder to renovate into a retirement home. The parties entered into a contract in September 2001. The contract price was $121,000. The defendants occupied the house in June 2002. By this time they had paid all the contract price save for a holdback of $14,000. They complained of numerous deficiencies, and refused to pay the balance.
The builder sued for the holdback. The homeowners counterclaimed for the cost of various deficiencies and damages.
The action went to trial in April 2006, four years after the defendants occupied the house. The trial took 9 days and was spread over a year, with the last day in April 2007. The decision was delivered in February 2009.
The result? The judge found that the defendants had established $7,000 worth of deficiencies, which he deducted from the holdback of $14,000. The balance of the holdback was ordered to be paid to the plaintiff. He also dismissed the balance of the defendants' counterclaim.
So, an action for a holdback of $14,000, which is well within the $25,000 jurisdiction of the Nova Scotia Small Claims Court, ended up taking almost 7 years (and 9 days of trial) to get a result that saw one party ordered to pay roughly $7,000 to the other. One shudders to think of the cost, both in money, time and emotion, that was spent by the parties to reach such a resolution of their dispute.
Such a result cannot be right. Nor can the blame for such a mismatch between cost (in time and money) and result be laid at the door of the parties. Surely the justice system has an obligation to develop procedures that would offer a quicker and cheaper resolution to such disputes.
Saturday, February 21, 2009
Following the wrong path ...
Arbitrations are often conducted by lawyers (both as advocates and as arbitrators). As a result there can be a tendency on the part of the players to replicate rather than avoid the formalities of the traditional legal system. The tendency must be resisted if it is not to eviscerate the benefits of ADR.
A recent case out of Ontario demonstrates what can go wrong if arbitrators and advocates are not more cautious about transferring court-like procedures into the arbitration process. In Van Kempen v. Brown Pineo Insurance Brokers Ltd a dispute arose between an employer and an employee. The employee considered himself dismissed in December 2003. Arbitration proceedings (pursuant to the employment agreement) were commenced. After a 23-day hearing the arbitrator released decisions on various aspects of the dispute in February and April 2008. Damages of $285,500 were awarded to the employer together with costs of $355,800.
The history of this case raises a question and a concern. First, why did it take more than four years to get to a hearing (or at least a decision), and why did the hearing take so long? Was it because the lawyers and the arbitrator chose the "traditional" approach of the courts to evidence and procedure? If so, wouldn't that defeat one of the ends of the arbitration process, which is to substitute more flexible (hence less expensive and quicker) procedures for those of the courts?
Second, the fact that the costs (which had been awarded on a full indemnity basis because of the losing party's failure to accept some offers to settle) were so high--higher than the damages awarded--raises the possibility that "ordinary" people will be reluctant to try arbitration because of the fear of the consequences. Which means that deep-pocked litigants will be able to "scare" impecunious opponents to give up otherwise meritorious claims or defences.
When that happens in the courts we become justly concerned about the resulting denial of access to justice. What then do we say when it happens in the field of arbitration--a field that at least in part was fashioned to address the problem that people couldn't afford to access justice through the court system.
A recent case out of Ontario demonstrates what can go wrong if arbitrators and advocates are not more cautious about transferring court-like procedures into the arbitration process. In Van Kempen v. Brown Pineo Insurance Brokers Ltd a dispute arose between an employer and an employee. The employee considered himself dismissed in December 2003. Arbitration proceedings (pursuant to the employment agreement) were commenced. After a 23-day hearing the arbitrator released decisions on various aspects of the dispute in February and April 2008. Damages of $285,500 were awarded to the employer together with costs of $355,800.
The history of this case raises a question and a concern. First, why did it take more than four years to get to a hearing (or at least a decision), and why did the hearing take so long? Was it because the lawyers and the arbitrator chose the "traditional" approach of the courts to evidence and procedure? If so, wouldn't that defeat one of the ends of the arbitration process, which is to substitute more flexible (hence less expensive and quicker) procedures for those of the courts?
Second, the fact that the costs (which had been awarded on a full indemnity basis because of the losing party's failure to accept some offers to settle) were so high--higher than the damages awarded--raises the possibility that "ordinary" people will be reluctant to try arbitration because of the fear of the consequences. Which means that deep-pocked litigants will be able to "scare" impecunious opponents to give up otherwise meritorious claims or defences.
When that happens in the courts we become justly concerned about the resulting denial of access to justice. What then do we say when it happens in the field of arbitration--a field that at least in part was fashioned to address the problem that people couldn't afford to access justice through the court system.
Wednesday, February 18, 2009
On-the-fly procedures ...
The other day I performed a med/arb fashioned by the parties. They recognized that there wasn't much dispute on the facts (as opposed to their legal consequences). They suggested that I meet with each side and hear their evidence (in the absence of the other), and then attempt to mediate a settlement. If that didn't work, I was to decide whether I had enough information to make a binding decision without a "formal" hearing. If so, they were content to let me make a decision. If not, I could hear evidence and cross-examination and then make a decision.
What I found interesting is that the parties recognized what most decision-makers will tell you: the issues that divide parties are rarely factual; they are more often about the emotional reaction of the parties or the legal inferences or consequences to be drawn from those facts. Why then is it necessary to burden the parties with the requirements of formal proof? Why not let them tell their story in their own words (which is what they so often want to do) and then provide them with a decision. Much quicker, much cheaper and, I believe, ultimately much more satisfying to the parties.
What I found interesting is that the parties recognized what most decision-makers will tell you: the issues that divide parties are rarely factual; they are more often about the emotional reaction of the parties or the legal inferences or consequences to be drawn from those facts. Why then is it necessary to burden the parties with the requirements of formal proof? Why not let them tell their story in their own words (which is what they so often want to do) and then provide them with a decision. Much quicker, much cheaper and, I believe, ultimately much more satisfying to the parties.
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